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Accountant-Client vs Attorney-Client Confidentiality
Both Accountant-Client vs Attorney-Client Confidentiality are designed to protect the privacy of the client and to ensure that the client can trust their lawyer or accountant to handle sensitive information with care. However, there are some major differences between the two.
Many people who are not well-versed in the law think that their communications with their accountant may be confidential and protected. Unfortunately, this is not typically the case. While federal law recognizes Accountant-Client Confidentiality, this confidentiality is narrow. The confidentiality applies only to advisors authorized under federal law to practice before the IRS. Furthermore, the confidentiality does not apply to criminal proceedings, documents needed to prepare a tax return, or communications regarding tax shelters. For example, if you are accused of tax crimes and your accountant is subpoenaed, the confidentiality will not apply. In fact, in several of our client’s tax audits over the years, the client’s CPA has received an IRS summons demanding confidential client information, which the CPA typically obeys.
In contrast, the Attorney-Client Confidentiality is broad and well-recognized. Attorney-Client Confidentiality is an excellent benefit to clients because it facilitates near-airtight confidential communications. Attorney-Client Confidentiality protects the vast majority of attorney-client communications made in confidence by the client when seeking legal advice or guidance. If you make a disclosure to an attorney, in nearly all cases (except for instance in furtherance of a crime) that disclosure will remain confidential.
In summary, with sensitive matters (including IRS audits), be careful with communications with all advisors; when in doubt, take advantage of Attorney-Client Confidentiality to get good confidential advice.
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